FOREST HAVEN is an institution for people who are mentally retarded. It is located in Laurel, Md. People who live at Forest Haven are called residents. People who work there are called staff. There have always been too many residents and not enough staff, although there was a time some years ago when the late Sen. Hubert H. Humphrey (D-Minn.) and Rep. Clair W. Burgener (R-Calif.) got Congress to spend a few million dollars, and conditions there got a little better. There were residents who got taught to feed themselves, to go to the toilet by themselves. It made a difference.

Some 450 of the residents live in buildings that used to be decent enough to qualify for federal money to hire staff and develop programs so the residents could develop whatever potential they had. Those buildings were called Medicaid buildings. But there was never enough staff hired in those buildings, and conditions for the residents deteriorated and a couple of weeks ago the federal government told the city it wasn't getting $6 million in Medicaid reimbursement for the care of people in those buildings. The federal government was not going to subsidize inhumane treatment of the retarded.

There are also some 380 people living in Forest Haven in buildings that never qualified for federal funds in the first place. So those people never got the benefit of federal funds for psychiatrists, social workers, therapists, nurses and nursing assistants who could have helped them get a little more out of life. So those 380 people live in old buildings, with huge dayrooms and insufficient light, a television going in a corner, a couple of staff standing around trying to keep order.

Things were so bad at Forest Haven that the parents of a resident who died there sued the District government and in 1978 U.S. District Court Judge John Pratt issued an order drawn up by the Justice Department and agreed to by the District government laying out a plan to phase out the institution. Programs would be developed for placing residents in jobs and in homes in the community. Care and programs would be provided for those who stayed in Forest Haven while they awaited community placement. It looked good on paper and for awhile the District government actually managed to go along with the order.

It was a nice idea while it lasted. Last week the Justice Department filed a brief with Judge Pratt outlining in devastating detail just how cavalierly the District government has ignored his order. Not only has it ignored it, Forest Haven administrators apparently don't give a damn. Justice Department lawyers wrote in their brief that the attitude of cooperation they found on the part of Forest Haven officials two years ago has "drastically changed. Thus, they now withhold from us evidence of Forest Haven's deficiences until all possible avenues of access are exhausted. Even where they are required by an order of this court to divulge information, they do so only long after the judicially established deadline, after innumerable letters and calls; in some cases, they seem to ignore the order completely."

Irresponsible public officials are forever blaming their shortcomings on money shortages. But Forest Haven got its budget requests, according to the Justice Department, only the people drawing up its budget didn't ask for enough money to comply with the judge's order. Although they are supposed to be preparing residents for life in the community, they have just slashed 91 percent out of the transportation budget -- which is what pays for their transportation to and from training and jobs designed to prepare them for living in the outside world.

To make matters worse, shortly after Forest Haven got almost all it asked for this year, someone "discovered," as the brief put it in a footnote, "a need for $2 million in funds for heating fuel. . . . They revised their budget acordingly, obtaining the needed $2 million by further reducing the already inadequate budgets for clothing, transportation, professional services and equipment. . . . It seems doubtful that rational planners would have entirely failed to foresee a $2 million budget item such as heating fuel."

Doubtful, indeed, but when it comes to administrative irrationality, the Forest Haven budget makers are getting signals straight from the top. With an institution clearly understaffed and under court order to improve conditions there, Mayor Marion Barry imposes a city government hiring freeze and while Forest Haven got exemptions, according to a mayoral spokesman, the recruitment process was "almost entirely halted," according to the brief. Then the mayor fails to ask the City Council to exempt the institution from the requirement that its employes be D.C. residents. Mind you, Forest Haven is in Laurel, Md., which means that one of the perks the city can offer prospective employes is a nice 45-minute drive in the country every morning. Only yesterday did the mayor move for such exemptions.

Now it is up to the City Council, which has been reluctant to dilute the residency requirement. But to continue applying it to Forest Haven is simply cruel. According to people who work out there as well as to the Justice brief, it has drastically slowed down recruitment. As a direct result of understaffing, human beings are being beaten, bitten, bruised, cut and otherwise assaulted by each other and by the staff.

Mayor Barry obviously isn't losing a whole lot of sleep over what's going on at Forest Haven. Otherwise he never would have allowed things to deteriorate so badly under his administration. That doesn't mean the City Council should ignore it, too.

What is going on at Forest Haven is criminal. It is time somebody in the District government cared.